Employees, not ‘independent contractors’: Labor Department cracks down on bosses’ misclassification abuse
Eric Risberg / AP

WASHINGTON—The Biden administration’s Labor Department will crack down, starting March 10, on bosses’ abusive tactic of misclassifying workers as “independent contractors.”

The announcement from acting Labor Secretary Julie Su—whom Biden has re-nominated to head the department—and top enforcement staffers drew cheers from congressional Democrats and anti-worker, pro-corporate rhetoric from the Republicans’ House Education and the Workforce Committee Chair Virginia Foxx.

Bosses now arbitrarily name workers as “independent contractors,” not “employees,” to abuse them, exploit them, deny them worker protections—such as the minimum wage, overtime pay, and workers comp—and to ban them from unionizing.

The bosses also escape paying Social Security and Medicare payroll taxes for “independent contractors,” leaving the workers themselves to shoulder both their share of those levies and the corporate share, too.

The corporate goal, as Su, pro-worker lawmakers, and the AFL-CIO all pointed out, is to maximize their profits at the expense of the people who actually do the work. One estimate is that misclassification costs workers $4 billion yearly.

“We can’t build a high-road economy” for workers “if we don’t combat the low road of misclassification,” Su told a Zoom press briefing before the rule’s release. “To employers who think it’s cheaper to misclassify” workers, “our reply is ‘not on our watch.’”

In the final rule to be published in the Federal Register on Jan. 11, the agency set up six criteria firms must meet to call a worker an independent contractor. Su also emphasized that “honest employers” who play by the rules will profit because the rule will curb low-road undercutters.

One of the criteria which stands out is “who has control” over the worker’s wages and working conditions.

Others include the boss’s direction of the worker and whether the worker is “an integral part of an employer’s business,” DOL Wage and Hour Administrator Jessica Looman told reporters.

“Our rule will be in line with the totality of circumstances” surrounding workers, and with court rulings on independent contractors—including judicial dismissal of a last-minute pro-corporate Trump-era “independent contractor” rule which gave corporations far more leeway.

Looman’s DOL agency will enforce the rule, targeting sectors where employer abuse of workers is prevalent, but also relying on tips and its own investigators, Looman said. She declined to say how much Wage and Hours time and workers would be assigned to enforcing the new rule.

Abusive sectors notably include construction, but also increasingly include other occupations, down to fast food. They also include “gig economy” firms such as Uber, Lyft, and DoorDash.

When Su implemented a similar curb on independent contractors during her term as California Labor Commissioner, the three companies waged a successful $200 million referendum campaign to get voters to overturn it.

The AFL-CIO praised the new curbs on independent contractors when DOL issued its draft of this new rule this past October.

“By restoring commonsense rules to determine who is an employee, and making it harder for employers to intentionally misclassify their employees as independent contractors, DOL’s announcement will increase protections and expand benefits to so many working people who have been subjected to corporate workarounds,” federation President Liz Shuler said then.

“Too many companies put profits over people, intentionally misclassifying their workers as contractors to avoid providing the pay, overtime, workplace rights, and benefits employees are due under labor and employment laws. This proposed rule will ensure DOL has the tools to protect employees against the current and escalating problem of misclassification.”

“Pervasive misclassification of workers as independent contractors jeopardizes workers’ access to fundamental workplace rights and undermines employers, taxpayers, and our economy,” said Rep. Bobby Scott, D-Va., top Democrat on the Republican-run House Education and the Workforce Committee.

“When unscrupulous employers misclassify workers, who should be treated as employees under the law, as independent contractors, they strip workers of the basic protections that ensure they can benefit from and contribute to our economy.  Worker misclassification also undermines law-abiding businesses that are forced to compete with dishonest employers who use misclassification to unfairly cut down on labor costs.”

By contrast, committee chair Rep. Virginia Foxx, R-N.C., a worker hater, yowled, “The modern economy is rapidly changing, and America’s workforce requires flexibility to thrive. The DOL’s rule is the polar opposite of flexibility. The livelihoods of independent contractors, app-based workers, freelancers, and self-employed individuals will be completely destroyed.”

Foxx is also on the verge of trying to push another anti-worker “messaging” bill from her committee majority through the GOP-run House. This week, lawmakers are expected to vote on HJRes 98, to permanently nullify the National Labor Relations Board’s planned rule mandating joint employers—think McDonald’s headquarters and its local franchises—are jointly responsible for obeying, or breaking, labor law.

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Mark Gruenberg
Mark Gruenberg

Award-winning journalist Mark Gruenberg is head of the Washington, D.C., bureau of People's World. He is also the editor of the union news service Press Associates Inc. (PAI). Known for his reporting skills, sharp wit, and voluminous knowledge of history, Mark is a compassionate interviewer but tough when going after big corporations and their billionaire owners.